The new $ 3.45 million capital increase will be used to repay debt and support the growth of its business in the United States and Australia, where contracts have grown significantly.
Smart locker software provider TZ Limited (ASX: TZL) has received firm pledges for its $ 3.45 million fundraiser – funds that will allow the company to pay down debt and support its rapid growth.
Over the past nine months, TZ has raised significant capital to deleverage the company and its associated interest costs, estimated at $ 1 million per year.
During that time, its debt rose from nearly $ 12 million to $ 2.5 million, and this latest increase of $ 3.45 million effectively means the company is now debt-free to pursue its strategy of growth.
The company is on a strong growth trajectory, with US sales totaling $ 5.5 million during the July-October period and recent contracts in Australia totaling $ 1 million.
A new direction
Over the past few months, TZ has embarked on a new path with new CEO Mario Vecchio on deck.
Vecchio is pivoting the company to software, a move that could unlock new opportunities for TZ in the multibillion-dollar IoT device market.
He has also been busy restructuring and strengthening the company’s balance sheet.
Under his leadership, TZ paid off its debt, claiming that it hampered opportunities and threatened its financial viability.
Now that all debts are paid off, the company says staff morale is higher and they are invigorated knowing the company no longer has the financial pressures it once had.
Employees feel more secure in their jobs, says TZ, which in turn has had a very positive impact on productivity, leading to an overall increase in the percentage of contracts won.
TZ’s U.S. business has reported revenue of $ 5.5 million in the past four months and has won contracts worth $ 7.75 million since the last corresponding period, a 40% increase.
The company has also recently won contracts with some of Australia’s largest companies.
Chevron Australia has just placed an order for the provision of TZ electronic and software services for a total of 2,800 smart lockers.
This contract follows TZ’s successful tender to provide CSL with hardware and software solutions for TZ smart lockers at its Melbourne office.
But like most other businesses, TZ faces some short-term cash flow hurdles due to tight global supply chains.
The company had to prepay for materials to secure supply, before receiving purchase order amounts from customers.
A recent deposit of $ 500,000 with a supplier to purchase materials illustrates the constraints it faces in terms of cash flow. There is a time lag between the order with these suppliers and the payment by the customers of their down payments on purchases.
Vecchio’s recent appointment as CEO marked the company’s transition to the next phase of its growth.
Vecchio believes TZ’s software technology was undervalued by previous management, and he is now looking to unlock that potential by moving the company from a perpetual license to a multi-term SaaS service agreement model, where annual subscriptions could be monetized.
Recently, existing TZ customers have requested âadditional featuresâ which have provided an opportunity for this annuity income in the future.
To seize this opportunity, management reinforced the TZ software development team.
The company will now raise $ 3.45 million through a stock offering to institutional, professional and sophisticated investors at 12.5 cents per share – with Reach Markets as the lead manager.
The placement will result in the issuance of 27,570,000 fully paid ordinary shares of TZL.
Coming out of Covid, TZ is poised to become a player of global significance where its products are seen as the best options to support the ever-changing landscape we see in the wake of the pandemic.
This article was developed in conjunction with TZ Limited, an advertiser of Stockhead at the time of publication.
This article does not constitute advice on financial products. You should consider getting independent advice before making any financial decisions.